Why did ONEOK's executive incentive payouts fall short of targets in 2020?

The primary financial performance metrics, Distributable Cash Flow (DCF) Per Share and Return on Invested Capital (ROIC), were rendered unattainable due to unprecedented market conditions caused by the COVID-19 pandemic. The safety metric TRIR also did not meet its required threshold.

How was the 40% corporate performance multiplier determined?

The multiplier was a combination of the 20% payout achieved for the Agency Reportable Environmental Event Rate (AREER), which exceeded its maximum target, and a 20% discretionary payout awarded by the Executive Compensation Committee. This discretionary payout recognized the company's qualitative performance in navigating the challenges of COVID-19.

What was the basis for the discretionary payout?

The discretionary payout was based on a qualitative evaluation of ONEOK's performance in responding to the direct and indirect impacts of COVID-19. This included aspects like crisis management, employee health and safety, financial stability, operational continuity, stakeholder interactions, and completion of special projects.

Will this impact future incentive plans?

While this filing specifically addresses 2020 awards, it highlights the company's compensation philosophy of paying for performance and retaining/motivating employees. The committee's use of discretion also demonstrates adaptability in extraordinary circumstances. Investors should monitor future filings for details on 2021 and subsequent incentive plans and performance metrics.

OKE 8-K: Leadership Changes

Summary

ONEOK Inc. (OKE) filed an 8-K on February 22, 2021, detailing the company's 2020 short-term incentive awards. Due to the significant and unforeseen impacts of the COVID-19 pandemic and resulting market volatility, the company's primary financial performance metrics for 2020, Distributable Cash Flow (DCF) Per Share and Return on Invested Capital (ROIC), were rendered unattainable, resulting in zero payout for these weighted components of the incentive plan. Similarly, the Total Recordable Incident Rate (TRIR) also failed to meet its threshold. However, the Agency Reportable Environmental Event Rate (AREER) exceeded its maximum target, contributing a 20% corporate performance multiplier. Despite the failure to meet financial targets, the Executive Compensation Committee exercised its discretionary authority, as permitted by the plan, to award an additional 20% payout. This discretionary adjustment was based on a qualitative assessment of the company's performance in responding to the challenges posed by COVID-19, including maintaining financial stability, operational continuity, employee safety, and stakeholder engagement. The Board of Directors ultimately approved a total corporate performance multiplier of 40%, composed of the 20% AREER payout and the 20% discretionary payout. This multiplier was then applied to individual executive compensation calculations.

Key Highlights

1Financial performance metrics (DCF per Share and ROIC) for 2020 were not met due to COVID-19 impacts, resulting in a 0% payout for these components.
2Safety metric TRIR also failed to meet its threshold, contributing 0% to the performance multiplier.
3Environmental metric AREER exceeded its maximum target, contributing a 20% corporate performance multiplier.
4The Executive Compensation Committee exercised discretion to award an additional 20% payout based on qualitative factors related to the company's response to COVID-19.
5The Board of Directors approved a total corporate performance multiplier of 40% for 2020 short-term incentive awards.
6This 40% multiplier, comprising 20% from AREER and 20% discretionary, was applied to executive compensation calculations.

ONEOK INC /NEW/ 8-K Report, Executive Changes (Feb 23, 2021)

Summary

Key Highlights

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